SEC News Digest

Issue 2011-110 June 8, 2011

Rules and related matters

Beneficial Ownership Reporting Requirements and Security-Based Swaps

The Securities and Exchange Commission readopted, without change, the relevant portions of existing rules that govern beneficial ownership determinations under Sections 13 and 16 of the Securities Exchange Act of 1934. The Commission has taken this action to preserve the application of the existing beneficial ownership rules to persons who purchase or sell security-based swaps after the effective date of new Section 13(o) under the Exchange Act, which was added by Section 766 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. Readoption of the relevant portions of Exchange Act Rules 13d-3 and 16a-1 confirms that following the July 16, 2011 statutory effective date of Section 13(o), persons who purchase or sell security-based swaps will remain within the scope of these rules to the same extent as they are now. (Rel. 34-64628)

Enforcement proceedings

On June 8, 2011, the Commission revoked the registration of each class of registered securities of DTC Data Technology Corp. (DTC Data Technology) for failure to make required periodic filings with the Commission.

Without admitting or denying the findings in the Order, except as to jurisdiction, which it admitted, DTC Data Technology consented to the entry of an Order Making Findings and Revoking Registration of Securities Pursuant to Section 12(j) of the Securities Exchange Act of 1934 as to DTC Data Technology Corp. finding that it had failed to comply with Section 13(a) of the Securities Exchange Act of 1934 (Exchange Act) and Rules 13a-1 and 13a-13 thereunder and revoking the registration of each class of DTC Data Technology’s securities pursuant to Section 12(j) of the Exchange Act. This Order settled the proceedings brought against DTC Data Technology in In the Matter of Dechtar Direct Inc., et al., Administrative Proceeding File No. 3-14391.

Brokers and dealers should be alert to the fact that Exchange Act Section 12(j) provides, in pertinent part, as follows:

No member of a national securities exchange, broker, or dealer shall make use of the mails or any means or instrumentality of interstate commerce to effect any transaction in, or to induce the purchase or sale of, any security the registration of which has been and is suspended or revoked . . . .

In the Matter of Data Fortress Systems Group, Ltd

On June 8, 2011, an Administrative Law Judge issued an Order Making Findings and Revoking Registrations by Default (Default Order) in Data Fortress Systems Group, Ltd., Admin. Proc. No. 3-14380. The Default Order finds that Respondents failed to comply with Section 13(a) of the Securities Exchange Act of 1934 (Exchange Act) and Exchange Act Rules 13a-1 and 13a-13 or 13a-16 because each failed to make periodic filings with the Commission for a number of years. Based on these findings, the Default Order, pursuant to Section 12(j) of the Exchange Act, revokes the registration of each class of registered securities of Data Fortress Systems Group Ltd., Digital Youth Network Corp., Fantom Technologies Inc., and KIK Technology International, Inc. (Rel. 34-64620; File No. 3-14380

In the Matter of Edwin Reese Davis, Jr. CPA

On June 8, 2011, the Commission issued an Order of Forthwith Suspension Pursuant to Rule 102(e) of the Commission’s Rules of Practice (Order) against Edwin Reese Davis, Jr., CPA. The Order finds that Edwin Reese Davis, Jr. (Davis) was a certified public accountant (CPA) in Utah from Oct. 29, 1977, until his license expired on Sept. 30, 2008. The Order further finds that on Nov. 4, 2010, Utah’s Division of Occupational & Professional Licensing revoked Davis’s CPA license. Despite having his license suspended and formally revoked, Davis continued to hold himself out to clients as a CPA and to prepare audit opinions that were filed with the Commission.

Based on the above, the Order forthwith suspends Davis from appearing or practicing before the Commission pursuant to Rule 102(e)(2) of the Commission’s Rules of Practice. (Rel. 34-64621; AAE Rel. 3290; File No. 3-14416)

In the Matter of Michael Migliozzi II and Brian William Flatow

On June 8, 2011, the Commission issued an Order Instituting Cease-and-Desist Proceedings Pursuant to Section 8A of the Securities Act of 1933, Making Findings, and Imposing a Cease-and-Desist Order (Order) against Michael Migliozzi II and Brian William Flatow.

The Order finds that, in November 2009, Migliozzi and Flatow created the BuyaBeerCompany.com website in order to solicit investors via crowdsourcing to invest $300 million to purchase the Pabst Brewing Company (Pabst). The Order further finds that solicitation was to be conducted in two stages. The first stage sought pledges and required that pledgors only supply an e-mail address, first name, last name, and pledge amount. If $300 million in pledges were received, the second stage would consist of collecting the pledges and undertaking to purchase Pabst. The Order finds that the website further explained that each investor would receive a “crowdsourced certificate of ownership,” as well as beer of a value equal to the amount invested. In February 2010, the Respondents publicly disclosed that they had raised over $200 million in pledges from over five million pledgors. The Order finds that the BuyaBeerCompany.com website continued to solicit pledges until the website was taken down in April 2010. No monies were collected.

The Order finds that Migliozzi and Flatow failed to register the offering with the Commission and that there was no applicable exemption from registration. Accordingly, the Order finds that Migliozzi and Flatow violated Section 5(c) of the Securities Act of 1933. As a result of the foregoing, the Order orders Migliozzi and Flatow to cease and desist from committing or causing any violations and from committing or causing any future violations of Section 5(c) of the Securities Act. Migliozzi and Flatow consented to the issuance of the Order without admitting or denying any of the findings in the Order, except jurisdiction, which they admitted. (Rel. 33-9216; File No. 3-14415)

In the Matter of MMR Investment Bankers, LLC (d/b/a MMR, Inc.)

On June 8, 2011, the Commission issued an Order Making Findings and Imposing Remedial Sanctions and a Cease-and-Desist Order Pursuant to Section 8A of the Securities Act of 1933 and Sections 15(b) and 21C of the Securities Exchange Act of 1934 as to Respondent MMR Investment Bankers, LLC , d/b/a MMR, Inc. (Order). MMR consented to the issuance of the Order without admitting or denying any of the findings in the Order.

The Order finds that MMR and others made material misrepresentations and omissions in connection with the sale of debentures being offered through MMR.

The Order orders MMR to cease-and-desist from committing or causing any violations and any future violations of Section 17(a) of the Securities Act, Sections 10(b) and 15(c) of the Exchange Act, and Rules 10b-5 and 17a-3(a)(17)(i)(B)(1) thereunder, censures MMR, and revokes the broker-dealer registration of MMR with the Commission. (Rels. 33-9217; 34-64622; File No. 3-14163)

In the Matter of William G. Martin, Jr.

On June 8, 2011, the Commission issued an Order Making Findings and Imposing Remedial Sanctions and a Cease-and-Desist Order Pursuant to Section 8A of the Securities Act of 1933 and Sections 15(b) and 21C of the Securities Exchange Act of 1934 as to Respondent William G. Martin (Order). Martin consented to the issuance of the Order without admitting or denying any of the findings in the Order.

The Order finds that Martin and others made material misrepresentations and omissions in connection with the offer and sale of debentures.

The Order orders Martin to cease-and-desist from committing or causing any violations and any future violations of Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act, and Rule 10b-5 and from aiding and abetting or causing violations of Sections 10(b), 15(c), and 17(a) and Rules 10b-5 and 17a-3(a)(17)(i)(B)(1) thereunder, orders Martin to pay disgorgement of $25,200.00, prejudgment interest of $2,292.32, and a civil penalty of $30,000 and bars Martin from association with any broker, dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical rating organization and from participating in any offering of a penny stock. (Rels. 33-9218; 34-64623; File No. 3-14163)

In the Matter of Eugene R. Rankin

On June 8, 2011, the Commission issued an Order Making Findings and Imposing Remedial Sanctions and a Cease-and-Desist Order Pursuant to Section 8A of the Securities Act of 1933 and Sections 15(b) and 21C of the Securities Exchange Act of 1934 as to Respondent Eugene R. Rankin (Order). Rankin consented to the issuance of the Order without admitting or denying any of the findings in the Order.

The Order finds that Rankin and others made material misrepresentations and omissions in connection with the offer and sale of debentures.

The Order orders Rankin to cease and desist from committing or causing any violations and any future violations of Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act, and Rule 10b-5 and from aiding and abetting or causing violations of Sections 10(b), 15(c), and 17(a) and Rules 10b-5 and 17a-3(a)(17)(i)(B)(1) thereunder, orders Rankin to pay a civil penalty of $15,000, and bars Rankin from association with any broker, dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical rating organization and from participating in any offering of a penny stock. (Rels. 33-9219; 34-64624; File No. 3-14163)

In the Matter of John A. Hubert

On June 8, 2011, the Commission issued an Order Making Findings and Imposing Remedial Sanctions and a Cease-and-Desist Order Pursuant to Section 8A of the Securities Act of 1933 and Sections 15(b) and 21C of the Securities Exchange Act of 1934 as to Respondent John A. Hubert (Order). Hubert consented to the issuance of the Order without admitting or denying any of the findings in the Order.

The Order finds that Hubert and others made material misrepresentations and omissions in connection with the offer and sale of debentures.

The Order orders Hubert to cease-and-desist from committing or causing any violations and any future violations of Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act, and Rule 10b-5 and from aiding and abetting or causing violations of Sections 10(b), 15(c), and 17(a) and Rules 10b-5 and 17a-3(a)(17)(i)(B)(1) thereunder, orders Hubert to pay disgorgement of $39,615.18, prejudgment interest of $3,603.58, and a civil penalty of $20,000 and bars Hubert from association with any broker, dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical rating organization and from participating in any offering of a penny stock. (Rels. 33-9220; 34-64625; File No. 3-14163)

In the Matter of Aaron D. Fimreite

On June 8, 2011, the Commission issued an Order Making Findings and Imposing Remedial Sanctions and a Cease-and-Desist Order Pursuant to Section 8A of the Securities Act of 1933 and Sections 15(b) and 21C of the Securities Exchange Act of 1934 as to Respondent Aaron D. Fimreite (Order). Fimreite consented to the issuance of the Order without admitting or denying any of the findings in the Order.

The Order finds that Fimreite and others made material misrepresentations and omissions in connection with the offer and sale of debentures.

The Order orders Fimreite to cease-and-desist from committing or causing any violations and any future violations of Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act, and Rule 10b-5 and from aiding and abetting or causing violations of Sections 10(b), 15(c), and 17(a) and Rules 10b-5 and 17a-3(a)(17)(i)(B)(1) thereunder, orders Fimreite to pay disgorgement of $ 2,644.78 and prejudgment interest of $240.60, and bars Fimreite from association with any broker, dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical rating organization and from participating in any offering of a penny stock. (Rels. 33-9221; 34-64626; File No. 3-14163)

The Securities and Exchange Commission today announced that on June 8, 2011, the U.S. District Court for the Southern District of New York entered a final judgment against Onele Trading & Finance Ltd. (Onele), a British Virgin Islands corporation, in the Commission’s pending injunctive action, SEC v. Onele Trading & Finance Ltd., 10 Civ. 9159 (JFK) (S.D.N.Y.). The Commission’s action was filed on Dec. 8, 2010 and was initially styled Securities and Exchange Commission v. One or More Unknown Purchasers of Securities of Wimm-Bill-Dann Foods OJSC. The Commission’s complaint alleged that certain unknown purchasers engaged in illegal insider trading in the American Depositary Receipts (ADRs) of Wimm-Bill-Dann Foods OJSC (WBD), a Russian corporation that manufactures and sells dairy and fruit juice products, ahead of a Dec. 2, 2010, announcement that PepsiCo, Inc. intended to acquire a 66 percent interest in WBD. The day the Commission filed its action, the district court entered a temporary restraining order freezing the shares and proceeds related to the alleged insider trading. At a hearing held on Dec. 16, 2010, the district court entered a preliminary injunction extending the relief provided in the temporary restraining order. On May 26, 2011, the Commission amended its complaint to name Onele as the sole defendant.

The Commission’s amended complaint alleges that Onele violated the antifraud provisions of the Securities Exchange Act of 1934 through its trading ahead of the acquisition announcement. The amended complaint alleges that Onele, through an account maintained at SG Private Banking (Suisse) SA in Geneva, Switzerland, placed orders to buy 400,000 WBD ADRs during the three days preceding the announcement. The day after the announcement, the closing price of WBD ADRs rose approximately 28 percent from the previous day’s close.

Without admitting or denying the allegations of the amended complaint, Onele consented to entry of a final judgment enjoining it from violations of the Exchange Act antifraud provisions; ordering it to pay disgorgement in the amount of $2,864,638; and imposing a civil money penalty in the amount of $2,864,638. The monetary sanctions will be paid out of the monies frozen pursuant to the temporary restraining order and preliminary injunction. [SEC v. Onele Trading & Finance Ltd., 10 Civ. 9159 (JFK) (S.D.N.Y.)] (LR-21993)

The Securities and Exchange Commission announced today that on June 7, 2011, Judge Elaine Bucklo of the United States District Court for the Northern District of Illinois entered a final judgment against Mark G. Meyer, of Coppell, Texas, and Mark Meyer & Associates, Inc. (MMAI), Meyer’s business. The final judgment: (1) enjoined Meyer and MMAI from violating Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933, Sections 10(b) and 15(a) of the Securities Exchange Act of 1934 and Rules 10b-5 and 10b-10 promulgated thereunder, and enjoined Meyer from aiding and abetting violations of Rule 10b-10 of the Exchange Act; (2) ordered Meyer and MMAI to pay disgorgement in the amount of $1,162,729.13 plus prejudgment interest of $565,204.12, for a total of $1,727,933.25; and (3) ordered Meyer to pay a civil penalty in the amount of $120,000, and MMAI to pay a civil penalty in the amount of $600,000.

The SEC’s complaint in this matter charges that Michael E. Kelly and 25 other defendants, including Meyer and MMAI, participated in a massive fraud on U.S. investors that involved the offer and sale of securities in the form of Universal Leases. Universal Lease investments were structured as timeshares in several hotels in Cancun, Mexico, coupled with a pre-arranged rental agreement that promised investors a high, fixed rate of return. The SEC’s complaint alleges that from 1999 until 2005, Kelly and others, including Meyer and MMAI, raised at least $428 million through the Universal Lease scheme from investors throughout the United States, with more than $136 million of the funds invested coming from IRA accounts. The SEC further alleges that a nationwide network of unregistered salespeople who sold the Universal Leases, including Meyer and MMAI, collected undisclosed commissions totaling more than $72 million. The SEC also alleges that Kelly and others ran the scheme from Cancun, Mexico, through a number of foreign entities in Mexico and Panama. According to the SEC's complaint, Kelly and others told investors that Universal Leases would generate guaranteed income through the leasing of investor timeshares by a large, independent leasing agent. In fact, the complaint alleges, the leasing agent was a small Panamanian travel agency controlled by Kelly, and for most of the scheme, its payments to investors came from accounts funded by money raised from new investors. Further, the complaint alleges that Kelly and the other defendants, including Meyer and MMAI, failed to disclose key facts about the Universal Lease investment, including the risks of the investment and that Kelly was paying commissions as high as 27% to the selling brokers. The SEC’s action against the remaining defendants is pending. [SEC v. Michael E. Kelly, et al., Case No. 1:07-CV-4979 in the United States District Court for the Northern District of Illinois] (LR-21994)

Self-regulatory organizations

Immediate Effectiveness of Proposed Rule Changes

A proposed rule change filed by Chicago Board Options Exchange relating to option expiration months open for trading on the Exchange (SR-CBOE-2011-053) has become effective under Section 19(b)(3)(A) of the Securities Exchange Act. Publication is expected in the Federal Register during the week of June 6. (Rel. 34-64614)

A proposed rule change filed by NASDAQ OMX BX (SR-BX-2011-033) to modify the functionality of the Post-Only Order has become effective under Section 19(b)(3)(A) of the Securities Exchange Act of 1934. Publication is expected in the Federal Register during the week of June 6. (Rel. 34-64615)

A proposed rule change filed by the Chicago Board Options Exchange to increase the Class Quoting Limit in one option class (SR-CBOE-2011-050) has become effective pursuant to Section 19(b)(3)(A) of the Securities Exchange Act of 1934. Publication is expected in the Federal Register during the week of June 6. (Rel. 34-64617)

Proposed Rule Change

The NASDAQ Stock Market filed a proposed rule change (SR-NASDAQ-2011-077) pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 and Rule 19b-4 thereunder to adopt a risk monitor mechanism. Publication is expected in the Federal Register during the week of June 6. (Rel. 34-64616)

Securities Act Registrations

The following registration statements have been filed with the SEC under the Securities Act of 1933. The reported information appears as follows: Form, Name, Address and Phone Number (if available) of the issuer of the security; Title and the number and/or face amount of the securities being offered; Name of the managing underwriter or depositor (if applicable); File number and date filed; Assigned Branch; and a designation if the statement is a New Issue.

Amendments to the Registrant's Code of Ethics, or Waiver of a Provision of the Code of Ethics

5.06

Change in Shell Company Status

6.01

ABS Informational and Computational Material.

6.02

Change of Servicer or Trustee.

6.03

Change in Credit Enhancement or Other External Support.

6.04

Failure to Make a Required Distribution.

6.05

Securities Act Updating Disclosure.

7.01

Regulation FD Disclosure

8.01

Other Events

9.01

Financial Statements and Exhibits

8-K reports may be viewed in person in the Commission's Public Reference Branch at 100 F Street, N.E., Washington, D.C. To obtain paper copies, please refer to information on the Commission's Web site at http://www.sec.gov/answers/publicdocs.htm. In most cases, you can view and download this information by using the search function located at http://www.sec.gov/edgar/searchedgar/companysearch.html.